Reverse Iron Butterfly
Buy an ATM Straddle and sell OTM wings to finance a low-cost, defined-risk breakout trade.
Interactive Payoff Curve & Greeks Simulation
Visualize the theoretical profit & loss at expiry vs T+0 immediate day curves. Drag the simulation slider to stress-test your trade.
Option Payoff Curve & Greeks
Net Option Greeks (Sensitivity Profile)
Values per 1 Lot standard unitMulti-Leg Position Structure (4 Legs)
| Action | Instrument / Strike | Type | Expiry | Approx Delta | Est. Premium | Qty Ratio |
|---|---|---|---|---|---|---|
| SELL | 24,000 PE | PUT | Monthly Expiry | -0.15 | ₹50 | 1x |
| BUY | 24,500 PE | PUT | Monthly Expiry | -0.50 | ₹240 | 1x |
| BUY | 24,500 CE | CALL | Monthly Expiry | +0.50 | ₹250 | 1x |
| SELL | 25,000 CE | CALL | Monthly Expiry | +0.15 | ₹60 | 1x |
How the Structure Works
Maximum loss is capped if price pins at the center; profit achieved on any breakout past wings.
A Reverse Iron Butterfly is the defined-risk version of the Long Straddle. You buy the ATM Call and Put while selling OTM wings 500 points away to cap your trade cost.
Institutional Strike Selection Rules
Phased Execution Blueprint
Follow this structured sequence to eliminate emotional hesitation during order entry, lifecycle management, and final exit.
Breakout Trigger
Deploy when expecting immediate sharp departure from current price.
Interactive Margin & Position Size Calculator
Calculate exact lot sizing based on the 1-2% risk rule to preserve capital against Black Swan events.
Options Position Size & Max Risk Calculator
Total net liquid equity in your brokerage account
Recommended: 1.0% - 2.0% for disciplined longevity
Wing width max loss or defined mental/system SL
Rigorous Risk Rules & Adjustment Protocols
Non-negotiable parameters for stop-loss triggers, portfolio caps, and firefighting adjustments when market tests your strikes.
- Close on breakout.
Defined risk.
NIFTY Reverse Iron Butterfly Trade Walkthrough
Nifty broke out sharply.
Bought 24500 CE/PE / Sold 24000 PE & 25000 CE (Debit = ₹380 = ₹9,500)
- Clean breakout move.
Common Mistakes to Avoid
Why it happens: Suffers theta decay.
Solution: Cut trade if no move in 48 hours.
Institutional Pro Tips
Reverse Iron Butterfly FAQs
What is the main risk?
The stock failing to move and closing exactly at the center strike on expiry day.
Alternative & Complementary Strategies
Sell an ATM Straddle and buy OTM protective wings (Call & Put) to create a defined-risk, high-credit neutral strategy.
Buy an ATM Call and an ATM Put at the same strike, profiting from explosive breakout moves in EITHER direction.
Buy an OTM Call Debit Spread and an OTM Put Debit Spread to capture massive breakout moves with capped defined risk and lower cost than a strangle.